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Disagreement on impact of RFS waiver
Two economists disagree on just how much impact a waiver of the Renewable Fuels Standard (RFS) would actually have on corn prices.
Last week, professor Bruce Babcock of the Center for Agriculture and Rural Development (CARD) at Iowa State University said that a total waiver of the RFS would reduce corn prices by only 28 cents per bushel—or less than five percent—and cause a less-than-five-percent reduction in ethanol production.
Pro-ethanol forces cited Babcock’s analysis as proof that such a waiver would not really have much impact on corn prices.
But economist Thomas Elam of FarmEcon LLC, who does consulting work for the livestock and poultry industries, says the corn yield forecast that Babcock used in his analysis was too high.
“Dr. Babcock was basing his forecast of that small impact on a 138 bushel corn yield,” Elam says. “We believe that the yield will be significantly below 138—perhaps in the 120 to 125 bushel range when the final crop production reports come in.”
Elam recently released his own study showing that if the RFS had contained a mandate adjustment provision based on the corn stocks-to-use ratio, corn prices would have been nearly one dollar a bushel lower in each of the past two years.
Legislation has been introduced in Congress that would tie the amount of corn ethanol produced to U.S. corn supplies, using the corn stocks-to-use ratio.
A coalition of meat, dairy and poultry groups is now petitioning the EPA to waive the federal mandate for the production of corn ethanol.
2012-07-31 07:48:19
Source: http://brownfieldagnews.com/2012/07/31/disagreement-on-impact-of-rfs-waiver/
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